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By:  Averitt                                                      S.B. No. 1938


A BILL TO BE ENTITLED

AN ACT

relating to mortgage guaranty insurance.                                      
	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:                        
	SECTION 1.  Amend Article 21.50, Section 5, Texas Insurance 
Code, as follows:
	Sec. 5.  In addition to the capital, surplus and reserves 
specified in Sections 2, 3 and 4 hereof, each mortgage guaranty 
insurer shall establish a contingency reserve, which shall be 
reported as a liability in the insurer's financial statements.  To 
provide for and maintain such reserve, the company shall annually 
contribute to such reserve fifty per cent (50%) of the earned 
premiums on its mortgage guaranty insurance business.  The earned 
premiums so reserved may be released to the insurer's surplus, 
annually, after they have been so maintained for 120 months.  
However, withdrawals may be made from such reserve by the insurer in 
any given year in which the insurer can demonstrate to the State 
Board of Insurance that the incurred losses for such year exceed 
thirty-five per cent (35%) of the corresponding earned premiums for 
such year.  The amount so withdrawn and released for such losses 
shall reduce any subsequent annual release to surplus from the 
established contingency reserve by an amount equal to the amount so 
withdrawn, and any balance in excess of the normal annual release 
from such reserve shall carry over and be deducted from subsequent 
annual releases.
	With the approval of the commissioner, a mortgage guaranty 
insurer may withdraw from the contingency reserve any amounts which 
are in excess of the requirements set out in Section 6 of this 
article.  In reviewing a request for withdrawal, the commissioner 
may consider those records that may be necessary to evaluate the 
request, including, but not limited to, records relating to loss 
development and trends.  If any portion of the contingency reserve 
for which withdrawal is requested is maintained by a reinsurer, the 
commissioner may also consider the financial condition of the 
reinsurer.
	SECTION 2.  This Act takes effect September 1, 2003.